EGYPT Law and Practice Contributed by: Nadia Abdallah, Zahra Ashraf, Beshoy Mounir and Yasmine Attia, Matouk Bassiouny & Hennawy
If any of the thresholds mentioned in 4.2 Mandato- ry Offer are likely to be triggered, the offeror must promptly notify the Financial Regulatory Authority (FRA) and submit an MTO draft (MTO Draft) for the acquisition of 100% of the share capital of the tar- get company (up to 90% if the company is to remain listed), which shall include the purpose and details of the acquisition. The MTO Draft must be submitted within 60 business days from the disclosure to the FRA, which may be extended for another 60 busi- ness days at the FRA’s discretion. Failure to submit within this timeframe results in a six-month ban on filing another MTO, unless the FRA grants an exemp- tion for serious reasons. Similarly, if the offer is with- drawn, a new offer is prohibited for six months from the withdrawal date. With regards to disclosure of the buyer’s intentions and plans, generally, an acquirer of a 25% of a pub- lic company’s share capital or voting rights (whether solely or together with its related parties) shall submit an investment plan and their intentions in connection with the company’s management to the EGX and FRA. Generally, the main shareholders of a listed company shall disclose to the FRA: (i) their shareholding stake along with their related parties upon the acquisition of a stake representing 5% or any multiple thereof of the company’s shares or voting rights provided that such disclosure shall be made post the execution of the transaction and before the first trading session post-execution; and (ii) their shareholding stake along with their related parties, periodically, at the beginning of January and July of each year. 4.2 Mandatory Offer Pursuant to the Executive Regulations of the Capital Market Law, the thresholds and events triggering the launch of an MTO include the following: • One trigger is where one-third or more of the issued share capital or the voting rights of the target company is acquired directly or indirectly, whether individually or through related parties. • A person/entity owning individually or through its related parties more than one-third of the issued share capital or the voting rights of the target company and less than 50% of the issued share
to reflect changes to each entity resulting from the demerger (eg, capital and shareholders). 3.4 Timing and Tax Authority Ruling Demergers or spin-offs entail three main phases, namely (i) the preparation of the demerger file and its evaluation by the Economic Performance Department (EPD) at the General Authority for Investment and Free Zones (GAFI); (ii) the demerger extraordinary general assembly meeting approving the demerger (along with the execution of the relevant ancillary documents); and (iii) the execution of the demerger. Typically, the EPD review process takes around one month from the submission of a complete and prop- erly prepared demerger file. In practice, however, it may extend up to six months depending on the EPD’s review and any additional document requests. The demerger extraordinary general assembly meeting process usually takes around one month, while the execution of the demerger, including amendments to the parent company and establishment of the result- ing company, may require an additional two to three months. Generally, no prior approvals from the Egyptian Tax Authority are required. However, it is possible to apply for a tax ruling from the Egyptian Tax Author- ity to clarify the transaction structure and confirm the applicable tax treatment of the spin-off in Egypt. The issuance of such a ruling typically takes around three months, although the timeline may vary on a case- by-case basis. 4. Acquisitions of Public (Exchange- Listed) Energy and Infrastructure Companies 4.1 Stakebuilding Acquiring a stake in a public company is legally per- missible prior to making an offer, provided that the stake does not trigger the thresholds of mandatory tender offers (MTOs) stipulated under the Executive Regulations of the Capital Market Law (and as further outlined in 4.2 Mandatory Offer ).
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